Valaris files for Chapter 11 bankruptcy

November 2020  |  DEALFRONT |  BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

November 2020 Issue


Another victim of the struggling energy sector, offshore drilling contractor Valaris plc has filed for Chapter 11 in order to implement a restructuring support agreement (RSA) and a backstop commitment agreement (BCA) with approximately 50 percent of its noteholders.

Under the terms of the RSA and BCA, Valaris will undergo financial restructuring intended to reduce its debt load by more than $6.5bn, support continued operations during the current lower demand environment, and provide a robust financial platform to take advantage of market recovery over the long term.

Furthermore, the RSA and BCA contemplate, among other items, the full equitisation of Valaris’ pre-petition revolving credit facility and unsecured notes, a fully backstopped rights offering to noteholders for $500m of new secured notes, and the effective cancellation of existing equity interests in the company in exchange for, in certain circumstances, warrants for post-emergence equity, and payment of trade claims in full in cash.

“The substantial downturn in the energy sector, exacerbated by the COVID-19 pandemic, requires that we take this step to create a stronger company able to adapt to the prolonged contraction in the industry, and to continue to enhance our position as overall market conditions improve,” said Tom Burke, president and chief executive of Valaris. “We have taken several steps to right-size and streamline our organisation in line with our goal to be the offshore drilling cost leader.”

Valaris aims to pursue an efficient restructuring process and exit Chapter 11 as soon as possible. The company is confident that a comprehensive financial restructuring is in its best interests and that of its stakeholders in the long term.

“We intend to use this restructuring to complement these measures to create a stronger financial structure for the company,” added Mr Burke. “Valaris will continue to serve our customers uninterrupted through this process, delivering safe and reliable operations, through its highly-capable rig fleet.”

Valaris intends to maintain liquidity and operate in the ordinary course of business as a result of having approximately $175m in cash and committed debtor-in-possession (DIP) financing from certain of its noteholders. The DIP financing will provide an additional $500m of liquidity, with an option to have no cash interest, to support its operations throughout the Chapter 11 process.

Upon completion of Chapter 11 and implementation of the RSA and BCA, Valaris expects to have one of the best balance sheets in the offshore drilling industry.

Serving as legal advisers to Valaris are Kirkland & Ellis LLP and Slaughter and May. Lazard Ltd. is serving as Valaris’ investment banker and Alvarez & Marsal North America LLC as its restructuring adviser. Kramer Levin Naftalis & Frankel LLP and Akin Gump Strauss Hauer & Feld LLP are serving as legal advisers to the consenting noteholders, and Houlihan Lokey Inc. is serving as financial adviser.

An industry leader in offshore drilling services across all water depths and geographies, UK-headquartered Valaris operates a high-quality rig fleet of ultra-deepwater drillships, versatile semisubmersibles and modern shallow-water jackups. The company has experience operating in nearly every major offshore basin.

Mr Burke concluded: “We appreciate the continued support of all of our stakeholders throughout this process, particularly our employees who continue to provide excellent service to our customers amid challenging market conditions, while upholding the Valaris values of integrity, safety, excellence, respect, ingenuity and stewardship.”

© Financier Worldwide


BY

Fraser Tennant


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